The Governor of the Central Bank of Iran, Ali Salehabadi, said goals anticipated in the Seventh Five-Year Economic Development Plan should be realistic and accessible.
The sixth plan ended last year and the government’s Plan and Budget Organization is working on the new one.
Speaking at a seminar on the next development plan at the Majlis Research Center, Salehabadi said the long-term plan should be significantly different from the sixth plan.
“In previous plans there were big gaps between the set targets and what was realized,” he was quoted as saying by the CBI website.
For example, one of the ambitious goals in the last plan was achieving sustainable and rapid economic growth of 8% a year by drawing on full national capacity and resources.
Observers say due to myriad of constraints, not the least of which was international sanctions and mismanagement, the growth target was never realized, except in the first year of the plan and a year after Tehran signed the historic 2015 nuclear deal with world powers.
Iran’s economy grew 12.5% in March 2016-17 compared to the preceding year, according to CBI data. The strong growth was attributed mainly to higher oil production following the removal of international sanctions in January 2016 under the nuclear agreement known as Joint Comprehensive Plan of Action or JCPOA.
Need for Banking Reforms
Salehabadi said the seventh plan must include precise provisions for reforming the banking system, fundamental change in approach toward the role of banks in funding the economy and a bigger space for other financial institutions, namely the capital market.
“Given the limited financial resources, diversifying finance through the banking network, lifting the capital market and boosting foreign investment should be paramount in drafting the seventh plan,” he said.
“Iran’s economy is bank-base and we must tap the financial capacity and potential of other sectors to realize development goals”.
The new economic roadmap should include provisions that are compatible with and contribute to reforms pursued by the central bank, he noted.
Salehabadi summarized the main components of banking reforms into three parts. “Rewriting the government’s relationship with the CBI and banks, the central bank’s interaction with banks and bank relations with customers”.
The national development plan must pay special attention to improving internationally-acceptable banking standards and address the inherent problem of capital inadequacy of most banks, the senior official told the meeting.
Iranian lenders, isolated by years of US economic sanctions from global interaction, have lagged behind regulatory and accounting norms, prompting the central bank and the government to launch a comprehensive reform plan to improve the key banking sector.
